On May 1 the national rules for real estate appraisals will change dramatically for lenders who want to sell their loans to Fannie Mae and Freddie Mac, which accounts for the 70% of today’s loan applications.
Lenders will have to adopt what's known as the "HVCC" - the home valuation code of conduct - and guarantee that every loan they sell to Fannie or Freddie complies with the code completely.
The new code will ban mortgage brokers from ordering appraisals, and will push much of the business to third-party appraisal management companies.
Those management firms, in turn, select appraisers from their own networks, leaving many of the appraisers out of the loop.
Management companies generally only deal with appraisers who'll work for much lower fees than they'd normally charge. However, this savings is not passed on to the consumer. The management company earns a 40% -60% profit margin on each transaction.
Mortgage groups are not enthusiastic about the May 1 changeover either, and the Appraisal Institute has been scathingly critical of the mandatory push to low-pay management companies.
There is one way to avoid the hassles associated with the May 1 changes: Switch to FHA financing, rather than conventional. FHA has its own long-standing appraisal rules, and doesn't plan to adopt Fannie's or Freddie's code.
The FHA loan limit in the Omaha Metro is $271,050.
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